Planning for sister-in-law's future after losing her father.

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agents
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Joined: Thu Nov 14, 2019 9:34 pm

Planning for sister-in-law's future after losing her father.

Post by agents » Thu Nov 14, 2019 10:29 pm

Hello all,

Long time lurker :wink: , first time poster. Appreciate all the advice I have read on here and applied to my own portfolio over the years.

My wife lost her father a few months back and I am in the process of helping her and my sister-in-law(A) setup a financial plan for their other sister(B). (B) is mid-thirties, single, no kids and has a slight mental disability. Trying to make this as simple as possible for her.

Big Picture:
- Lives paycheck to paycheck, take home roughly $1200 a month
- Job security below average
- No 401k
- No debt, less than $1000 in savings
- Rents with multiple roommates, takes bus to work

She will be inheriting between $300k-400k in the near future.

Rough Plan:
- Open HYSA with 2 years of expenses
- Open Vanguard accounts (Roth IRA and brokerage)
- Max Roth IRA (L2050) put rest into brokerage (L2050)
- Each year move IRA max out of brokerage and into IRA

Does the above seem like a solid simple plan for her? I made a promise to my father-in-law that I would take care of her, so I want to make sure my wife and (A) make the right decisions. I plan on linking them to this thread to see your replies.

Thanks for your time. :sharebeer

crre
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Re: Planning for sister-in-law's future after losing her father.

Post by crre » Thu Nov 14, 2019 11:26 pm

is there a chance B will squander the money and/or be taken advantage of by someone who could convince her to sign it over? if so, perhaps consider setting up a trust, with the other sisters as trustees.

if i understand correctly, the money now belongs to B, so this would require B's cooperation, but could be framed as "we need your signature here in order to keep your money safe".

Topic Author
agents
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Joined: Thu Nov 14, 2019 9:34 pm

Re: Planning for sister-in-law's future after losing her father.

Post by agents » Thu Nov 14, 2019 11:32 pm

crre wrote:
Thu Nov 14, 2019 11:26 pm
is there a chance B will squander the money and/or be taken advantage of by someone who could convince her to sign it over? if so, perhaps consider setting up a trust, with the other sisters as trustees.

if i understand correctly, the money now belongs to B, so this would require B's cooperation, but could be framed as "we need your signature here in order to keep your money safe".
Yes, my wife and (A) will be opening a trust and have already talked with (B) about it and she is on board. They will both be trustees as well. Thanks for your reply. I left that out of my post by mistake.

student
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Re: Planning for sister-in-law's future after losing her father.

Post by student » Thu Nov 14, 2019 11:37 pm

agents wrote:
Thu Nov 14, 2019 11:32 pm
crre wrote:
Thu Nov 14, 2019 11:26 pm
is there a chance B will squander the money and/or be taken advantage of by someone who could convince her to sign it over? if so, perhaps consider setting up a trust, with the other sisters as trustees.

if i understand correctly, the money now belongs to B, so this would require B's cooperation, but could be framed as "we need your signature here in order to keep your money safe".
Yes, my wife and (A) will be opening a trust and have already talked with (B) about it and she is on board. They will both be trustees as well. Thanks for your reply. I left that out of my post by mistake.
This seems prudent.

Dottie57
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Re: Planning for sister-in-law's future after losing her father.

Post by Dottie57 » Fri Nov 15, 2019 12:33 pm

With the trust it sounds good. I just would be conservative with inheritance until it funds Retirement accounts.

junior
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Re: Planning for sister-in-law's future after losing her father.

Post by junior » Fri Nov 15, 2019 12:46 pm

Your plan is to put 90% of you sister-in-law's money in stocks? Have you gotten her permission to do that? Many people don't have the risk tolerance for 90% stocks. Are you ready to explain to her why her stocks just went down $100,000 during a market crash? Is she going to be okay with that explanation? I'm flashing back to a nervous relative shouting at an investment advisor "NO STOCKS". Maybe that won't happen with you.

L2050 is marketed for people who won't access their money until 2050. While it can be used for other things, are you planning to tell her "no" if she wants money before 2050?

dbr
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Re: Planning for sister-in-law's future after losing her father.

Post by dbr » Fri Nov 15, 2019 7:21 pm

A financial plan is far more than what investments to pick. The starting point is what she wants to do with the money. Slight mental disability is not the same as incompetent. A previous poster has asked if everyone is on board that none of the money is to be used until the beneficiary reaches age 65. Is that going to be one of the terms of the trust? Are there going to be successor beneficiaries given that she has no dependents? If there aren't it may be she can't be a trustee as well as the beneficiary. What does the attorney say?

I think in general that when managing other people's money extremes of risk should be avoided. 90% stocks might be an extreme of risk or it might not be.

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Raymond
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Re: Planning for sister-in-law's future after losing her father.

Post by Raymond » Fri Nov 15, 2019 7:51 pm

Welcome to Bogleheads.

Your wife and (A) might consider one of the Vanguard LifeStrategy Funds, particularly the middle two (LifeStrategy Conservative Growth Fund or LifeStrategy Moderate Growth Fund).

Also, how much does (B) know about her inheritance? If word gets out, there will be no shortage of people willing to help her spend, borrow, or steal it :(
"Ritter, Tod und Teufel"

delamer
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Re: Planning for sister-in-law's future after losing her father.

Post by delamer » Fri Nov 15, 2019 8:07 pm

I understand the impulse to provide for her future, but I’d set some aside to improve her quality of life now.

6Pack
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Re: Planning for sister-in-law's future after losing her father.

Post by 6Pack » Fri Nov 15, 2019 8:19 pm

Just thinking out loud here: the money is your wife’s sister’s to inherit outright (at least that’s what it sounds like). You can’t necessarily take her money and put it in a trust for her.

I’d talk to a lawyer in your state before you do anything. From the sounds of it, you may have potential liability if you don’t disburse the funds correctly.

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Watty
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Re: Planning for sister-in-law's future after losing her father.

Post by Watty » Fri Nov 15, 2019 9:25 pm

agents wrote:
Thu Nov 14, 2019 10:29 pm
- Rents with multiple roommates, takes bus to work
Just for brainstorming what do small houses, condos, or duplexes cost in your area?

Having the roomates could be a good or bad thing for her but if you live in an area where she could buy a condo for $100K or so then that could pretty well lock in her housing costs, but she would have condo fees and property taxes.

It could bring up a lot of issues but she might even be able to rent out a room.

Lots of pros and cons but it could be worth considering.

123
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Re: Planning for sister-in-law's future after losing her father.

Post by 123 » Fri Nov 15, 2019 9:30 pm

delamer wrote:
Fri Nov 15, 2019 8:07 pm
I understand the impulse to provide for her future, but I’d set some aside to improve her quality of life now.
+1 While having roommates can be a benefit for some individuals is that how she wishes to continue to live? Would it be realistic for some of the money to be used to buy her a small home or condo? It could depend on the cost-of-living and housing market in her current area. Or would she be better off remaining in a rental situation.?
The closest helping hand is at the end of your own arm.

Katietsu
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Re: Planning for sister-in-law's future after losing her father.

Post by Katietsu » Fri Nov 15, 2019 9:51 pm

Is it possible that the SIL would qualify for a special needs trust?

HomeStretch
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Re: Planning for sister-in-law's future after losing her father.

Post by HomeStretch » Fri Nov 15, 2019 10:47 pm

Ask SIL what she wants to do with her money. Her take home pay is low. A reasonable distribution each year starting now might improve her quality of life significantly.

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celia
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Re: Planning for sister-in-law's future after losing her father.

Post by celia » Sat Nov 16, 2019 5:39 am

agents wrote:
Thu Nov 14, 2019 10:29 pm
Big Picture:
- Lives paycheck to paycheck, take home roughly $1200 a month

Rough Plan:
- Open HYSA with 2 years of expenses
Can she live comfortably on $1200 a month? If so, what would her 2 years of expenses be for?

While this is being set up, an estate plan for her should be generated. When she dies, who does she want to be her beneficiaries? Who would she like to make health care power of attorney decisions for her, if/when she can't make them herself? In fact, all of you should have these documents in place.

Plano
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Re: Planning for sister-in-law's future after losing her father.

Post by Plano » Sat Nov 16, 2019 6:36 am

Will this inheritance disqualify her from any state programs or benefits for the disabled? Many are income- or asset-based, like state medical. If she loses her current health insurance, you will need to plan for that expense.

I like the idea of buying a small, low-maintenance home so she never has to worry about homelessness.

So heartening to see you and her sisters looking out for her best interests, keeping your promise to their dad. It’s the right thing to do.

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